Netflix Canadian deal with Paramount draws new battle lines with cable operators

Netflix on Monday continued to beef up its first international play, securing the Canadian rights to hundreds of movies from Paramount Pictures.

In a five-year deal, the company not only secured exclusive distribution of "first runs," but also shut out Canadian pay-TV operators from the content.

"It's impressive," said Michael Hirsh, CEO of Toronto-based Cookie Jar Entertainment Inc., which signed a deal with Netflix last year for the digital rights to portions of its programming stable. "It means they're competitive with cable now."

The company also announced it had decided to reduce picture quality for movies and TVs in an effort to help its users come in under month data caps set by Canadian ISPs.

In a blog post, the company said it had established tree settings for viewers worried about data usage.

"Good," the new default setting with good picture quality has the lowest data use per hour (about 0.3 GB/hour), said Neil Hunt, Netflix chief product officer in Canada. The "better" setting, he said, will improve the picture quality but results in data usage of about 0.7 GB/hour). The "best" picture quality will use about 2.3GB/hour when streaming HD content.

Hunt said members could adjust the settings as they desired.

According to Hunt:

The "Good" setting limits video/audio to 625 kbps/64 kbps. With this setting, 30 hours of content would be up to 9 GBytes per month.

The "Better" setting limits video/audio to a maximum of 1300 kbps/192 kpbs. With this setting, 30 hours of content would be less than 20 GBytes per month.

The "Best" setting will use any of the video/audio rates available. Our highest quality files are 4800 kbps (for 1080p HD video) and 384 kbps audio (for 5.1 audio). 30 hours of this highest quality streaming would be less than 67 GBytes. However, only a selection of movies and TV shows are available at these rates, and in many cases, the effective video/audio upper limit for non-HD content is 2200 kbps/192 kbps. At that rate, 30 hours of streaming is less than 31 GBytes.

"We made these changes because many Canadian Internet service providers unfortunately enforce monthly caps on the total amount of data consumed," Hunt said.

On the new movie front, Netflix will be adding about 350 hours of video from Paramount, including Iron Man 2 and The Curious Case of Benjamin Button. "Over time, we will add fan favorites like Titanic and The Last Airbender andcomedies like Zoolander and Wayne's World," said a Netflix spokesperson.

Netflix pushed into Canada last year, offering a $7.99 streaming service it painted as a supplement to Canadian pay-TV offerings. But deals with the CBC for day-after rights to some popular programming, and this deal with Paramount make Netflix more of a competitor than a partner.

Analysts say the company likely will add one new international market to its portfolio per year.